Heavy rains and strong winds on Sulawesi island have sparked concerns among Indonesian cocoa growers and exporters that the main harvest due to begin in March may be disrupted.
"There's a lot of rain and output could get affected as cocoa pods could turn black," an international trader said on Friday, adding that presently the crops were flowering.
Sulawesi Island accounts for 75 percent of Indonesia's cocoa output. Rain during the country's wet season, which runs from October to February, has caused landslides and flooding in recent weeks, particularly in Central Sulawesi province.
"Looking at the current conditions, I think output could be less than expected," one Makassar trader said.
Previous forecasts from traders had been for the main-crop output to rise to more than 400,000 tonnes this year,
"The situation will be clearer in the next ten days or so when rain is likely to subside," the Makassar trader said.
The rains have disrupted drying and resulted in poor quality stock. Bean counts were five beans more than the standard count at 115 per 100 grams.
Daily arrivals in Makassar port, the main gateway for Indonesia's cocoa exports, have fallen to 100 tonnes as the mid-crop has ended on the commodity-rich island.
Traders said Asia's largest cocoa grinder, Malaysia, was an active buyer, and the United States remained absent from the market.
"One shipment is bound for the United States with 5,000 tonnes, but it is still tentative," one Palu trader said.
Sulawesi beans collected from farmers and middlemen eased to between 11,800 to 11,900 rupiah ($1.41-1.42) per kg on Friday, against 12,000 rupiah a kg from the previous week.
Differentials stayed afloat at $150 a tonne under New York futures for March cocoa, which edged $3 lower at $1,605 a tonne on Thursday, with a $1,595-$1,629 range. May cocoa ended $1 a tonne lower at $1,609.
In the product market, the cocoa butter ratio was flat at 1.96 to 2.05 times London futures for nearby shipments.
With buying interest emerging only at the lower level, dealers speculated that buyers were either well covered ahead of Valentine's Day and Easter, or waiting for more weakness in bean prices before buying more.
"I've had one US customer who wanted to buy spot butter at 1.96 times. But I can't sell the product at that ratio when everyone is talking about two times London," said one dealer in Malaysia, which is Asia's largest grinder.
"The spot market is very tight, that's why Malaysian grinders prefer to sell forward. But I heard the Indonesians are selling spot because they can easily get beans to process," said the dealer, referring to Asia's second-largest grinder.
The processing of cocoa beans results in several products, which are priced as ratios to the bean prices.
The ratios indicate demand for the products and the beans. Some Asian dealers said the April/May ratio was bid at 1.93 times and June/July at 1.86, but grinders asked for higher prices, mainly because of a firm ratio in Europe.
Grinders in Asia often look to the European market for direction.
In Europe, ex-Dutch factory butter ratios for February/March were quoted at 2.35 times London's March contract.
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